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Unions face pensions crisis

Campaigning union forced to cut benefits at its own staff pension scheme

The Public & Commercial Services Union (PCS) has fought some of the toughest campaigns of recent years to protect the pension rights of around 250,000 members.

There have been public sector walk-outs and a ‘68 is too late’ offensive to tackle the austerity-led Coalition’s plan to raise the retirement age.

Yet the PCS has a pension crisis of its own: a deficit of around £65.5m against a declining annual income that is currently £27.6m.

The repairs needed to solve this issue are as hard-hitting as anything the PCS has opposed. One proposal has been for PCS staff to receive half their salary on retirement only after 45 years of service, against 30 years today.

“We read about that and thought our own changes won’t look so bad,” laughs a senior member of the trade union movement.

Many of the more public sector and industrial-focused unions face similar problems.

Unison, for example, had a liability of £120.4m in 2012, up from £106.6m the previous year, against income of £173.1m. Unite, the country’s biggest union with 1.4m members, saw its liabilities grow by nearly one-fifth to £144m the same year, narrowing the gap on its income of £155m.

” There is also a broader issue of the change in demographic of their staff ”

The PCS has struggled partly because of civil service cuts which have resulted in a fall in membership and therefore the income needed to address the pension burden.

Union sources point out that there is also a broader issue of the change in demographic of their staff.

“Until 10 or 15 years ago shop stewards would go and work for the unions as a last career stop in their 50s,” says one union negotiator. “That changed so younger people, even of around 21, were being hired. The pension was meant for a different type of person.”

Lucrative final salary schemes were an incentive and a reward for experienced shop stewards to move to a union’s headquarters. Only working for around a decade would mean that they built up a good extra pension pot, but did not work for the time that would result in huge, unaffordable payouts.

“Traditionally unions were rather like charities, paying low wages but having good benefits”

That change started to hit at the point when the economy, and therefore investment income, was in a downswing. The situation might worsen as more staff with big pension pots retire in the coming years.

Unions introduced these attractive pensions to lure the best staff because salaries were rarely competitive with other organisations.

Simon Kew, director of pensions at Jackal Advisory, says: “Traditionally unions were rather like charities, paying low wages but having good benefits. The vast majority of these are historic benefits, quite mature benefits – it’s all a legacy problem when they’re seeing falling membership and falling revenues, so even a moderate deficit will look disproportionate.”

And if the unions don’t take tough action now, that burden will only grow.

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Category : Savants in the News — admin @ 6:28 am June 11, 2014